Fixed assets are the primary asset

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Reference no: EM13730981

Background

Fixed assets are the primary asset of Old Line Manufacturing Company (Old Line). As of December 2012, Old Line is having liquidity problems. Old Line’s borrowing base is limited to 60% of its net fixed assets. The CFO has been entertaining the idea of changing from US GAAP to IFRS. The bank has agreed to loan up to 60% of the net fixed assets regardless of whether Old Line uses US GAAP or IFRS for accounting purposes.

Equipment H

Three years ago, Old Line borrowed one-million British Pound Sterling when the Pound Sterling was $2. This loan was at 10% interest with principle and interest due in 1 year. Old Line used this money to finance the construction of an office building which was completed at the end of that year. When the loan came due the British Pound Sterling was $1.90, so Old Line had to pay $2,090,000 on this $2,000,000 (1million Pound Sterling) loan.

Reference no: EM13730981

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